Free Education Guide on Goods & Service Tax (GST)

Imposing GST on food could have more impact on the poor. But exception of food from GST regime will shrink the tax base.

• Easy and Faster Availability of Food items ;After implemntion of GST because of the removal of octroi and entry tax which will significantly reduce the time and hassle of transporting goods across state borders, there will be easy and faster availability of food items.
• Alcoholic beverages  have been excluded from GST and they will be taxed separately.
• Essential items may be zero rated under GST : GST Council has indicated that essential food items will be either zero rated or will charged low GST rate .
• Dairy products ;- Due to the government’s priority of a farmer-centric approach and enhancing rural prosperity. dairy prodcuts may be zero rated or kept at low rate under GST
• Mandi Tax :– It is still unclear if Mandi tax which is imposed on fresh vegetables by some states like Uttar Pradesh and Rajasthan will be subsumed by GST.

Free Education Guide on Goods & Service Tax (GST)

Increase in Prices of Air Tickets

Currently, air travel attracts service tax at an abated rate of 6% for economy travel and 9% for non-economy travel.  A Proposed GST rate of 18% may lead to a 9% to 12% increase in the cost of air travel for passengers, thus hampering the growth of the industry.

Increase on Input Cost

Under the proposed GST regime, the carriers will not be able to take credit of taxes paid on aviation turbine fuel as the same has been kept outside the GST regime which will result in further increase in input costs and increase in ticket prices.

Cost of Aircrafts may go up

Presently import of aircrafts in India for providing scheduled air transport services is exempt from payment of customs duty on account of customs duty exemptions. Under the proposed GST, if this exemption is not continued then cost of Aircraft may go up.

Leasing of aircrafts may be costly

At present import of aircrafts in India under operating lease model does not attract customs duty. Under the finance lease arrangements, service tax is applicable only on 10% of lease rentals.

At proposed 18% GST rate it is likely that costs of such aircrafts imported/procured under lease arrangements may go-up.

Maintenance, repair and overhaul services 

At present, both VAT and Service tax is applicable on maintenance activities undertaken in India (referred to as ‘works contract’). This has resulted in higher tax burden for the maintenance, repair and overhaul industry.

Under the proposed Model GST Law , it is expected that works contract transactions which involves supply of goods and services would be treated as ‘pure service transactions’ for levy of GST and thus provide the relief to the Aviation sector from cascading effect of taxation.

Presently maintenance and repair of aircraft undertaken outside India do not attract service tax.

under proposed GST, it is expected that services of maintenance and repair of aircraft rendered by both overseas as well as Indian service providers would attract GST, irrespective of the place of performance of such maintenance and repair activities

Import of Aircraft parts may be costlier

Parts/ spares imported into India for use in repair/ maintenance of the aircraft are currently exempt from levy of customs duties. If this exemption is not continued under GST then  import of parts will be costlier.

Free Education Guide on Goods & Service Tax (GST)